A growing number of businesses globally use Bitcoin and other digital currencies for operational, investment, and transactional purposes. The reason behind this increased adoption is that they believe it can give them a competitive edge in the market, and for good reason, considering that the use of cryptocurrencies will continue to expand. People are becoming increasingly interested in other crypto assets beyond Bitcoin; for instance, many of them are looking at the Dogecoin price because they believe it can have long-term potential and could remain a major player in the crypto market. Cryptocurrencies are receiving equal attention from major brands that have embraced crypto as a payment option for different goods and services, including airline tickets and groceries.
Without a doubt, embracing cryptocurrencies presents opportunities for businesses, but at the same time, it can pose challenges, which is why companies planning to use crypto should first take the time to understand why they are undertaking this action by asking themselves a few questions. Using crypto for operations requires a different way of thinking than when using it for investments. For instance, while investing is a long-term play, implementing crypto for operational purposes requires a thoughtful process based on real-time decisions. This blog explores in detail the adoption of cryptocurrency in business and everything that needs to be considered in the process, so keep reading to learn more.
What Are The Motivations Of Businesses That Decide To Embrace Cryptocurrency?
There are different reasons why businesses choose to implement crypto. First and foremost, crypto can offer access to new demographic groups. Users often consist of a tech-savvy and cutting-edge clientele that is willing to invest in luxury services and goods. In fact, according to a survey, 85% of merchants viewed crypto as a method to reach new customers, while 77% said they embraced crypto due to its lower transaction fees.
For some businesses, crypto is about spurring internal awareness about the revolutionary technology and positioning the company in the groundbreaking space for a future that could involve CBDCs (central bank digital currencies). Furthermore, a greater awareness of cryptocurrencies can translate into new liquidity and investment options.
Other companies simply want to take advantage of the opportunities that fiat money doesn’t provide. For instance, programmable money can allow revenue sharing in real time and accurately, boosting transparency. To some, crypto is also an effective alternative to cash, which can depreciate because of inflation. On the other hand, crypto is an investable currency, and it has shown excellent performance over the past years. There are volatility risks that need to be taken into account.
A Look At The Two Approaches When Embracing Crypto For Business
For smooth business operations, there are two possible ways you can use cryptocurrency: keeping it off the books or fully integrating it into your payment systems. It’s worth noting that these two choices uniquely impact your company, so it’s worth reflecting on them both.
On the one hand, some companies choose cryptocurrencies mainly for payment processing, which means that they can be sent to a digital wallet and converted into fiat currency (and vice-versa) without appearing as a crypto-enabled payment in the books. This approach enables companies to conduct transactions faster with cryptocurrency but without touching it directly. It’s a straightforward way to make changes within the business by leveraging the opportunities that cryptocurrencies provide and relying on a third-party vendor that does the conversion from digital currency to fiat money. This third-party charges a fee for their services and considers the compliance procedures and risks that each payment involves.
On the other hand, businesses plan to include crypto in their operations and use it directly. This means that rather than just utilizing it for payments, companies incorporate crypto within their systems, either through a third-party vendor who provides them with a digital wallet to monitor and process transactions or, more daringly, through a method that allows them to self-adopt crypto and manage their private keys on their own.
The first approach is the one that most companies embrace, while the latter tends to be riskier as it has some legal requirements. Thus, it’s advisable to consult with an expert in the field when considering this approach.
Challenges Businesses Face In Implementing Crypto
The crypto market may be rewarding, but at the same time, it has a volatile nature, which means that businesses should never take lightly the decision to implement cryptocurrencies for payments. Given that they aren’t backed by a centralized authority (like in the case of fiat currencies), this only leaves them susceptible to unexpected changes in value. For example, when it comes to Bitcoin, its highest value (in November 2021) was followed by a 70% increase in July 2022 – all of this happened within less than a year, showing the volatile nature of cryptocurrencies.
Furthermore, it’s worth noting that blockchain and crypto lack proper tax and legal codes, and their unregulated nature makes them challenging to use for businesses. So, it’s essential to not only consider the benefits but also weigh the disadvantages and be honest about what it would look like to implement crypto in your business. It’s not just about addressing the challenges but also creating a roadmap for the implementation process itself, such as the overall strategy and the short-term and long-term goals, the decisions that need to be taken, the resources that the company will need for this change to happen, as well as whether it has all the necessary processes in place to monitor transactions’ execution and performance.
The Bottom Line
Implementing cryptocurrency in your business is indeed a big commitment, so it’s essential to take the time to consider it thoroughly and see how it can fit your business plan and future goals. The good news is that you can integrate crypto in your company incrementally, with the contribution of everyone, including the board, finance, risk, accounting, tech, communications, operations, and legal departments, to name a few.
As the article already shows, implementing cryptocurrency isn’t necessarily easy because it can pose some significant challenges that need to be considered when taking the first steps in this process. Overall, implementing crypto may bring advantages to your business, but it’s essential to take the time to reflect on your motivations for doing this, given that it is an important decision to make.
